Tech expert Gene Munster reacts to Apple’s earnings

Earnings season kicked into full force Thursday as iPhone maker Apple Inc. (NASDAQ: AAPL) reported fiscal second quarter results which sent shares lower by 2%.

FQ2 details

Apple reported EPS of $2.55 in the fiscal second quarter on revenue of $58.3 billion. By comparison, Wall Street analysts were expecting the company to earn $2.226 per share on revenue of $54.54 billion. 

Apple CEO Tim Cook commented in the earnings report the company still managed to show growth despite the “unprecedented global impact” from COVID-19. Specifically, revenue rose 0.49% year-over-year while EPS rose 3.66%.

Coinciding with the report, Apple’s board boosted its dividend by 6% to 82 cents per share and authorized an incremental $50 billion to its existing share repurchase program. 

Looking forward, Apple didn’t offer any guidance for its June-ending quarter. Cook seperately told CNBC in a brief interview there is reason to be optomostic after a “very steep fall-off” in February was followed up with a recovery in March and “further recovery” in April.

Munster: Stock should be up 5%

Heading into Apple’s Thursday report, the company was labeled among the most “at-risk” tech giants from the coronavirus outbreak, Loup Ventures co-founder and former research analyst Gene Munster said on CNBC’s “Fast Money.” Instead, Apple reported flat year-over-year revenue on a 7% iPhone sale decline.

Fewer iPhone sales were offset by an “impressive” 24% year-over-year jump in wearables, Munster said.

Ignore 2020, look at 2021

Apple has a plethora of new product launches and ideas for 2021 and beyond, including a 5G iphone, new Airpods, Apple TV, a new watch, among many others. According to Munster, investors should “take 2020 and really discount it almost entirely.”

CEO Cook “teased” at a recent company meeting some of its launches will be “iconic.” Munster said this should at the very least dictate Apple’s stock shouldn’t trade at a discounted valuation versus some of its tech peers, like Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc (NASDAQ: GOOG), and Facebook, Inc. (NASDAQ: FB) who each trade between 25 times and 30 times earnings.

Apple’s new lineup of products for 2021 and beyond, coupled with a commitment to buyback its stock, should result in a 10% to 15% earnings per share growth which is “very similar” to its large cap tech peers, Munster said.

“I understand that cash is usually not that valued by other tech investors,” he said. “But the power this company has to generate cash on a consistent basis — not in this period but normally on a consistent basis — I think should drive at a minimum a consistent multiple with Facebook, and Google and Microsoft.